How can footwear and apparel brands fix inventory mismatches?

Global stockouts and overstocks cost retailers about $1.8t each year.

Footwear and apparel brands are under pressure to overhaul how they plan production and inventory as faster-changing consumer demand collides with complex global supply chains, according to a report by Kearney.

Traditional planning models struggle to keep pace with compressed product cycles and expanding assortments, leaving companies vulnerable to costly mismatches between supply and demand, the Chicago-based consulting firm said.

Merchandising teams typically finalise product line plans months in advance, often across numerous styles, colour options and size ranges.

At the same time, supply chains must coordinate with contract manufacturers across several regions, where high minimum order quantities and long production lead times limit flexibility.

Demand planners then face the challenge of forecasting trends such as sneaker collaborations or seasonal fashion releases, even when past launches produced sharply different results across markets.

“This is the hidden mathematics of footwear and apparel,” the report said. “Each season carries hundreds of SKUs (stock-keeping units) across multiple sizes that must be allocated across channels and geographies.”

Because production decisions are made long before consumer demand becomes clear, errors in planning can quickly erode margins.

Global stockouts and overstocks cost retailers about $1.8t each year, with fashion among the hardest-hit sectors, according to the report.

Inventory mistakes can cut profits by as much as a fifth, whilst only about three-fifths of fashion products sell at full price. The rest are typically discounted or remain unsold.

Planning complexity is particularly pronounced in footwear. A single sneaker design offered across men’s, women’s, and children’s sizes and several colourways can generate hundreds of SKUs before accounting for variations across retail channels.

Seasonal volatility adds another layer of uncertainty. Carryover inventory competes with fresh releases, whilst trends driven by weather patterns or social media can rapidly shift demand faster than supply chains can respond.

Market data also suggest that demand patterns are becoming more uneven. Figures from Alibaba Group Holding Ltd.’s platform showed that Southeast Asia’s apparel export trade declined overall last year even as certain categories, such as summer clothing sets and shorts, posted sharp increases in demand.

The contrast highlights how inventory can quickly become misaligned with consumer preferences, the report said.

To address these challenges, Kearney said brands should adopt “connected planning,” an approach that integrates merchandising, demand forecasting, supply planning and inventory allocation across the entire product cycle.

Under this model, teams work from a single demand outlook, letting decisions in one area be assessed against their impact across production, distribution and sales.

Connected planning can help companies respond more quickly to real-time sales signals, model alternative supply scenarios and adjust production or inventory allocation across factories and markets.

It can also reduce the need for costly air shipments and deep markdowns by improving visibility across supply chains and retail channels.

However, the report said technology alone would not solve the problem. Whilst advanced planning platforms can improve data analysis and scenario modelling, successful implementation also requires stronger governance, aligned incentives and coordination between merchandising and supply chain teams.

“The planning complexity embedded in footwear and apparel isn’t going away,” the report said, noting that product assortments continue to expand whilst sourcing networks stretch across multiple continents.

Questions to ponder:

1. Can “connected planning” realistically replace traditional seasonal planning models in a fast-moving fashion environment?
2. To what extent can better coordination between merchandising and supply chain teams improve margins in the footwear sector?